While American depositary receipts of Teva, the world’s
biggest maker of generic drugs, declined 3 percent last week,
the shares are still up 7.1 percent this year. The Bloomberg
Israel-US Equity Index of the largest Israeli companies traded
in New York retreated 3.1 percent last week

Teva will shrink the size of its board and work to boost
the number of directors with global pharmaceutical experience,
the Petach Tikva, Israel-based company said in a Jan. 22
statement. New Chief Executive Officer Erez Vigodman is
streamlining operations to boost earnings amid setbacks for the
company’s multiple-sclerosis treatments. Copaxone faces generic
competition this year and Laquinimod, slated to be Copaxone’s
successor, failed to win European Union backing last week.

“The announcement to transfer Teva’s board is a highly
positive decision,” Ronny Gal, a New York-based analyst at
Bernstein who raised his price estimate on Teva by 16 percent
last week, said by phone Jan. 24. If the EU decision not to back
Laquinimod is temporary, “I see this as a momentary negative
setback. I see Laquinimod as potentially worth hundreds of
millions in the medium term.”

Teva’s Tel Aviv shares fell 2.5 percent to 149.50 shekels
($42.77) at the close in Israel, closing the largest premium to
the company’s New York-traded ADRs since December 2012. The ADRs
sank to $42.93 on Jan. 24.

Expiring Patents

Teva’s U.S. stock trades at 9.6 times estimated earnings,
the cheapest valuation among the world’s largest generic drug
companies, according to data compiled by Bloomberg.

Jeremy Levin left in October after less than 18 months as
CEO in a dispute with Chairman Phillip Frost. The company on
Jan. 9 chose board member Vigodman to lead a drive to cut $2
billion in costs as patents expire on top-seller Copaxone. The
changes come after Levin’s departure fueled concern that the
board was rife with internal feuds and meddling in company
operations.

The most important thing for Teva to do is bring new drugs
to market than can offset generic competition for Copaxone,
according to David Maris, a senior research analyst at BMO
Capital Markets in New York.

“They have the Copaxone reformulation, and they have other
drugs in the pipeline, like Laquinimod,” Maris said in a Jan.
23 telephone interview. “Corporate governance is the umbrella
over it all. If they don’t address that, no matter what they do
people will look at them skeptically.”

$4 Billion

Copaxone had sales of almost $4 billion in 2012, making it
Teva’s biggest-selling product. A U.S. patent protecting the
drug until 2015 was invalidated in July by a U.S. Court of
Appeals, opening the way for cheaper generic competitors as soon
as May.

Teva said last week it agreed to buy NuPathe Inc. for $144
million, outbidding rival Endo Health Solutions Inc. to gain
NuPathe’s migraine patch. The purchase will add to Teva’s lineup
of drugs to treat central nervous system illnesses.

“They’re taking the right steps to build their generic
business,” Maris said. “This shows they’re going to be active
and that their business development isn’t just sitting by the
way side.”

Denise Bradley, a spokeswoman for Teva in North Wales,
Pennsylvania, didn’t respond to an e-mailed request for comment.

The Bloomberg Israel-US gauge declined to 110.38 last week.
That compares with a 2 percent weekly drop for Israel’s
benchmark TA-25 Index.